Key Takeaways
Super Micro Computer (
SMCI
) shares jumped in early trading Tuesday, adding to an 11% surge yesterday, as investors bid up the server marker’s stock after a few days of big losses during the broader market’s
tariff-fueled sell-off
.
Sentiment surrounding the stock likely received a boost from J.P. Morgan analysts who recently pointed out that the company would only need to increase its global prices by 4%, based on the portion of its hardware that would be affected by tariffs.
Supermicro shares saw significant price swings in both directions during the first quarter as the company dealt with accounting issues that raised concerns of a potential Nasdaq delisting until the company
met the exchange’s deadline to file several delayed financial reports in February
. The stock was up 6% at around $35 in recent trading.
Below, we break down the
technicals
on Supermicro’s chart and identify major price levels that investors may be monitoring.
Potential Bear Trap
After
gapping
lower in late October, Supermicro shares oscillated within an orderly
ascending channel
until breaking down below the pattern’s lower trendline toward the end of last month.
However, despite falling to its lowest level since early February last week, the stock completed a
bullish engulfing pattern
in Monday’s trading session, potentially forming a
bear trap
—a trading event that lures investors to sell upon a breach of major
support
before the price makes a sudden move higher.
What’s more, Monday’s buying coincided with the
relative strength index (RSI)
rallying from a reading of around 35, the same level the indicator bottomed at in early February before the stock roughly doubled over a two-week period.
Let’s identify two major overhead areas to watch on Supermicro’s chart amid the potential for follow-through buying, and also point out vital support levels worth monitoring.
Major Overhead Areas to Watch
A decisive close back above the ascending channel’s lower trendline could trigger a rally to around $48. This level, currently just above the closely watched
200-day moving average
, connects a range of comparable trading activity on the chart extending back to last year’s prominent August
swing low
.
Buying above this price could see the stock revisit the $63 area. Investors who have
accumulated shares
during the stock’s recent decline may decide to
lock in profits
in this region near a trendline that links last year’s late-August peak with the February
swing high
.
Interestingly, this location also sits in the same vicinity as a projected bars pattern target that takes the stock’s sharp
trend
higher during February and overlays it from the low of yesterday’s bullish engulfing candle.
Vital Support Levels Worth Monitoring
A breach of the bullish engulfing candle’s low could see Supermicro shares initially retrace to around $26, a location on the chart where they may attract support near the January
trough
and early-November
countertrend
high.
Finally, a
breakdown
below this level paves the way for a potential drop to $17. Investors may seek
buy-and-hold
opportunities in this region near the mid-November trough, which also marks the stock’s
52-week low
.
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As of the date this article was written, the author does not own any of the above securities.
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